The lack of a retirement plan or difficult circumstances can make many people thankful for the option of having a home that they can use to tide over financial difficulties. And an equity release helps you do just that. However, in order to ensure that the deal is worth it, you need to ensure you understand exactly what you are getting, and also what you are giving up for it. An equity release calculator will help you do just that.Do you want to learn more? Visit UK equity release calculator.
Most websites that offer you quotes from loan providers will also give you an equity release calculator that you can use to figure out how much you stand to get. This is cheaper than a financial advisor and also very easy. Before you start, you need to understand a few factor that will affect the equity that you release from your home as well as the income that arises from that equity.
- At any given point, the equity of your home will depend considerably on the market value of your home, its age, its condition and any other mortgage you have.
- Lifetime Mortgages will typically bring in more equity than Home Reversions.
- You will not receive all of the value of your house as a loan, you will usually only get a proportion of it.
When using an equity release calculator, you will be asked to pick from a number of options. It’s good to find out how each of these options affects your income.
If you are picking a Lifetime Mortgage, you get these options on your equity release calculator:
- Roll Up mortgage: No regular payments. The interest is ‘rolled up’ into the loan amount and repaid when the house is sold. If interest rates rise, or if you considerably outlive your expectance, it can mean that the amount to be repaid is much more than what comes from the sale.
- Fixed Repayment Mortgage: The interest doesn’t ‘rolll-up’ nor do you make regular payments for interest. Instead you and the provider decide on a repayment amount which is fixed and paid when the house is sold. This is usually a better deal, however, you get the loan as a lumpsum only. Also, since the amount to be repaid is higher than the lumpsum, if you end up selling the house very quickly, it may not be a very good deal.
- Interest Only Mortgage: Where you only pay the interest monthly and the principal amount is recovered from sales proceeds. Not such a good option if interest rates are flexible and rise faster than your income.
If you are choosing a Home Reversion you stand to get anywhere between 20 to 60% of your property value as a lumpsum or income, the older you are the more you get. However while using an equity calculator, bear in mind that:
- You may have to make some monthly payment in order to continue living.
- You have already sold the home, so don’t stand to make any profits or pass anything on after your death or when you move out.
- You will still be expected to maintain and keep the house.